Argentina Caps Fuel Prices to Stem Inflation Before Election

April 10 (Bloomberg) -- Argentina froze the price of
gasoline and diesel sold at service stations for six months in a
bid to stem annual inflation as high as 25 percent. Shares of
YPF SA, the country’s largest refiner, fell.

Price caps were set for six areas covering the whole
country in a resolution by Internal Commerce Secretary Guillermo
Moreno published in the official gazette today.

The restrictions follow agreements with supermarkets to
freeze prices at least until June 1 as President Cristina
Fernandez de Kirchner struggles with quickening inflation before
congressional elections in October. An independent inflation
gauge published by opposition lawmakers estimated consumer
prices rose 25 percent in the year through Feb. 28, compared
with a 10.8 percent rate reported by the government’s statistics
agency for the same span.

“It’s absolutely necessary to dictate policies to
determine the price of liquid fuels in order to avoid
inconsistencies in the price paid by consumers,” Moreno said in
the resolution.

YPF, the state-run oil company that produces more than half
the country’s fuel, tumbled 3.3 percent to 116.90 pesos in
Buenos Aires.

‘Most Affected’

“YPF will be the most affected because of its market share
and also because this signals to investors that the government
will do whatever it wishes to try to control inflation,” said
Carlos Aszpis, an equity strategist at Schweber & Cia. Sociedad
de Bolsa SA, in a phone interview from Buenos Aires. That
“includes limiting profits to shareholders to favor
consumers.”

Royal Dutch Shell Plc, Bridas Corp.’s Axion Energy and
Petroleo Brasileiro SA are the largest refiners in Argentina
after YPF.

YPF said in an e-mailed statement that the measures won’t
affect its business plan. Petrobras and Shell declined to
comment. Axion didn’t respond to requests for comment.

YPF Chief Executive Officer Miguel Galuccio said in August
that the company would raise gasoline prices in line with
production costs. The company has since raised fuel prices in
all of its 1,500 service stations twice, and Galuccio said as
recently as Feb. 22 that price increases would continue.

Fernandez’s government seized a 51 percent stake in YPF
from Repsol SA a year ago after claiming the Spanish oil
producer wasn’t investing enough to boost output in Argentina.